Sign Up for Disruption: Winning in the Subscription Economy
Just a few years ago, consumers typically associated subscription services with utilities and print media. Yet the rapid rise of digital technologies has led to an explosion in the number of services available, which cater to almost every aspect of consumers’ lives – from Spotify and Netflix to Birchbox and Blue Apron.
Today, you can even purchase haute couture as a service. Rent the Runway (RTR) lets consumers hire key pieces of designer clothing and trade them in for others when they feel like a change. RTR taps into consumers’ desire for convenience, curation and fun. In a similar way, California-based Golden Tote sends subscribers a monthly grab-bag of the latest fashion, hand-picked by stylists based on the user’s “style profile”.
RTR and Golden Tote are just the latest examples of how subscription services are revolutionizing retail. With the number of “subscription box” sites jumping 3,000% between 2013 and 2016, it’s clear the subscription economy has reached a tipping point.
It’s easy to see why this business model makes sense for established retailers as well as start-ups. In addition to creating new revenue streams, chains can use subscription services to secure new consumer data. The insights gleaned from this data increase the lifetime value of each customer through cross-selling, targeted advertising, tailored offers and discounts.
A subscription service can also be an effective way of promoting new products – Sephora’s “Play!” box sends consumers deluxe sample-size cosmetics each month, plus a card offering a free in-store consultation on how to use each item.
So how can established retail chains respond to this seismic change – and become the disruptors, not the disrupted?
One option is to acquire or partner with existing subscription services. Leading retailers have much to gain from claiming their own share of the subscription economy. And yet, to be successful, there are some key principles that they need to get right first.
Staying timely and reliable
Whatever the product, subscription services need to be consistent and reliable. The reason consumers are loyal to Graze isn’t just because of the selection of snacks on offer – it’s also because they are confident that Graze will deliver their box on time, every week. This means subscribers can “tick the item off their thinking list”.
Innovating the unexpected
For essential commodities like snacks, dogfood or diapers, reliability and convenience drive loyalty. But for non-essential, higher-end items, consumers expect a positive experience beyond the core product. Leading retailers will focus on innovating new ways to delight and inspire subscribers.
For fashion brands such as RTR and Golden Tote, this means curating the best the catwalk has to offer. A key component here is personalization, with consumers seeking products, services and content tailored to their individual preferences.
Owning the new customer experience
Leading retailers understand that, when they provide a subscription service, the supply chain becomes the customer experience. They can no longer rely on in-store displays and talented sales staff to wow customers and reinforce their brand. Instead they provide a seamless digital journey, from the point of sign-up to receipt of goods. A single clunky online experience will cause many customers to lose confidence in the retailer – and make them less likely to subscribe.
Customer-focused, technology driven
For many retailers, moving to a subscription model sounds like a daunting leap into the unknown. The true benefit is getting closer to consumers. Whether the product offerings are low-touch essentials like cleaning products or razor blades or higher end, more emotionally-charged items such as an evening gown or a designer bag, they both rely on accurate consumer information.
The ability to provide reliability, accurate product delivery, along with a great consumer experience calls for reinforced abilities in innovation, digitalization, and the ability to harness consumer data successfully. By putting technology at the heart of their strategy, and inventing new ways to delight and inspire their customers, they can become major players in this growing economy – inspiring fandom at home as well as footfall in the store.